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Ahmed bunow block prodn b plan july 2021

management (Jigjiga University)

Studocu is not sponsored or endorsed by any college or university

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Ahmed Bunow Abdi - Block Production Business Plan In Jijiga City

Ahmed Bunow Abdi

(Bunow Block Production)
Business Plan
In Jijiga City, Somali Region

Project Promoter: Ahmed Bunow Abdi

Submitted To: Devalopment Bank Of Ethiopia, Jijiga Branch

July 2021 G.C

Jijiga, Ethiopia

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Contents
1. EXECUTIVE SUMMARY .................................................................................................... 4
1. Background information ................................................................................................ 6
1.1. The applicant.................................................................................................................. 6
1.2. Brief History of the Promoters/Project................................................................. 7
1.3. Capital Structure of the Promoters: ..................................................................... 7
1.4. Past Performance and Credit information of the Project .............................. 8
1.4.1. Past performance ................................................................................................... 8
1.4.2. Credit Information ................................................................................................. 8
1.4.3. The Lease .................................................................................................................. 8
1.5. Project Background Information and Objectives ............................................. 8
1.5.1. Objectives of the Study ....................................................................................... 9
2. CHAPTER THREE: PROJECT AND COMMODITY DESCRIPTION ..................... 10
2.1. Project Concept ........................................................................................................... 10
2.2. Project Justification ................................................................................................... 10
2.3. Purpose of the Project............................................................................................. 12
2.4. Product range and product description ............................................................. 13
2.4.1. Cement Concrete blocks and hollow blocks .............................................. 13
2.4.2. Paver Blocks ........................................................................................................... 15
2.5. Proposed Business Legal structure ...................................................................... 17
3. CHAPTER THREE: MARKET STUDY .......................................................................... 18
3.1. Demand and supply scenario ................................................................................ 18
3.2. Local demand and supply ....................................................................................... 19
Table 3.1: PROJECTED IMPLEMENTATION OF CONSTRUCTION PROJECTS .... 20
Item ........................................................................................................................................... 20
Year ........................................................................................................................................... 20
Primary Village ..................................................................................................................... 20
3.3. Competitive Advantages.......................................................................................... 22
3.4. Target market and Marketing Strategy ............................................................. 23
3.5. Pricing and Distribution............................................................................................ 24
CHAPTER FOUR: TECHNICAL STUDY .............................................................................. 25
4.1. Introduction .................................................................................................................. 25
4.2. Potential Locations ..................................................................................................... 25
4.3. Main Resources ........................................................................................................... 26
4.3.1. Raw materials and consumables ................................................................... 27
4.3.2. Raw materials for cement concrete blocks ................................................ 27
4.4. Machinery and Equipment ...................................................................................... 27
4.5. The Manufacturing Process .................................................................................... 30
4.5.1. Cement concrete blocks .................................................................................... 33
4.6. Quality control ............................................................................................................. 35
4.6.1. Physical Tests: ...................................................................................................... 36
4.6.2. Testing Equipment ............................................................................................... 36
4.7. Technical know-how .................................................................................................. 37

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4.8. Production Capacity ................................................................................................... 38

4.9. Requirement of power and fuel ............................................................................ 39
4.10. Materials And Inputs .............................................................................................. 39
4.11. Utilities ......................................................................................................................... 41
CHAPTER FIVE: ORGANIZATION, AND MANAGEMENT ............................................ 42
5.1. Organizational structure and Management ........................................................ 42
5.2. Manpower Requirement ............................................................................................. 43
5.3. Training requirement ................................................................................................ 45
CHAPTER SIX: FINANCIAL ANALYSIS ........................................................................... 46
6.1. Introduction .................................................................................................................. 46
6.2. Total Initial Investment Cost ................................................................................. 46
6.3. Production Cost ........................................................................................................... 47
6.4. Project Financial Results .......................................................................................... 48
6.4.1. Profit/Loss Forecast............................................................................................. 48
6.4.2. Cash Flow Forecast.............................................................................................. 48
6.4.3. Balance Sheet Projection .................................................................................. 49
6.5. Measures of project worth ...................................................................................... 49
6.5.1. Net present value ................................................................................................ 49
6.5.2. Internal Rate of Return (IRR) ......................................................................... 49
6.5.3. Sensitivity Analysis ............................................................................................. 50
CHAPTER SEVEN: ENVIRONMENTAL IMPACT AND SOCIO-ECONOMIC
BENEFIT ..................................................................................................................................... 51
7.1. The environmental aspect of the manufacturing process .......................... 51
7.2. Waste generated and mitigation measures ..................................................... 51
CHAPTER EIGHT: CONCLUSION AND RECOMMENDATION .................................... 53
8.1. Conclusion ..................................................................................................................... 53
8.2. Recommendation........................................................................................................ 54
Annexes...................................................................................................................................... 55

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1. EXECUTIVE SUMMARY

Ethiopia is scoring a greater improvement in its growth and industrial sector

is the one and most important segment that is playing a crucial role in
contributing to the overall development of the country. Construction
materials are important inputs required for the fast increasing situation of
the industrial sector in Ethiopia.
The full annual production capacity for the envisaged factory will be
1,632,000 pieces of blocks products in different sizes. Concerning the
market aspect of the project, the feasibility study reveals the existence of a
wide demand gap for the products. It is expected that the country’s
economy, grows at a faster rate, which simultaneously boosts the demand
for these products.

The total investment cost required for the project is Birr 9.003 million. It is
planned that 41 % or Birr 3.703 million is contributed by the promoter and
the remaining 59% or Birr 5.3 million would be financed by a bank. The
financial analyses reveal the project will generate a net profit of Birr 1.951
and Birr 3.183 million during its first and tenth year of operation
respectively. The cash flow projection shows positive growth in the
cumulative cash balance, it will grow from Birr 2.376 million of the first year
to Birr 28.541 million on its tenth year of operation. These imply that the
project will not face liquidity constraint to meet its operational cost and debt
obligation. The project is financially viable with a financial internal rate of
return (FIRR) of 65% after tax and a net present value (NPV) of Birr 17.420
million, discounted at 12%.
The contribution of the project to the socio-economic development of the
country is through employment creation, saving foreign currency, generation
of income to the owners as well as the employees and generating income to
the government in the form of tax.

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Regarding the environmental impact, the concerned organ believes, the

benefits that result from the implementation of the project outweigh the
adverse socio-economic & socio-ecological impacts.

Project Summary
I. Project Investment
Description Amount Percentage
Total Fixed Investment Costs 85%
7,616,000
Working Capital 15%
1,387,569
Total 100%
9,003,569
II. Source of fund
Description Amount D/E Ratio
Debt - Bank Loan 59%
5,300,000
Equity 41%
3,703,569
Total Investment Cost 100%
9,003,569
III. Expected Financial results
Description Year-1 Year-10
Sales Revenue
18,966,000 34,138,800
Profit (Loss)
1,951,277 3,183,054
Cumulative Cash Balance
2,376,741 28,541,063
NPV after Tax
17,420,966
FIRR before Tax 84%
FIRR after Tax 65%
IV. Sensitivity Analysis
Description IRR After Tax
When Revenue decreased By 10% 51%
When Operating Costs increased By 10% 60%
When Investment Costs increased By 10% 59%

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1. Background information

1.1. The applicant

 Name :- Ahmed Bunow Abdi (Bunow block production)

 Address:- Jijiga, Ethiopia
Region: -Somali Regional State
Zone: -Fafan
Woreda: -Jigjiga
Kebele:-10
 Form of Organization:- Sole propertnership
 Legal form of Business:- Sole propertnership
 Investment Licensing Bureau: -Somali regional state investment and
diaspora bureau
 License Number:-
 Date Licensed :
 Commercial Registration Certificate: -Somali regional State Trade and
Industry Bureau.
 Registration Number:-
 Date Registered: -
 TIN No:- 0037441316 (ahmed bunow abdi)
 Type of project:-block production Factory
 Project Objective: -Producing quality of different blocks sized in to 10 mm,
15 mm, 18mm, and 20 mm block products & supply to local market to
generate reasonable profit for the owner.

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1.2. Brief History of the Promoters/Project

Bunow block production factory is owned by one shareholder Namely Ato. Ahmed
Bunow abdi holding 100 shares, Each share values Birr 25,000 and the total paid up
capital of the company is Birr 2,500,000 registered according to the commercial code of
Ethiopia. Ato Mohamed abdulahi muhumed is a general manager of the company
having ample experiences in government and INGOs experience in different areas in the
positions of Administration and Finance as HRM, as an administrative clerk, as and as
director in the different organizations. He has BA degree in Public admisntration and
development management from Dire Dawa University and attends various trainings.
The owner and main shareholders educational background is limited to grade twelve or
high school certificate.
The outstanding and continuous demands of concrete blocks and constructionamterials
inputs in the Somali region and jijiga town for investors in block production factory has
attracted the promoters to engage in this industry in order to have a share of big market
and rise from time to time in the region as well the surround and in the country at all.

1.3. Capital Structure of the Promoters:

S.N Name of shareholder Number of Share Share Value Paid up Capital(Birr)

1 Ahmed bunow abdi 100 Birr 25,000 Birr 2,500,000
2
3

Total Birr 2,500,000

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1.4. Past Performance and Credit information of the Project

1.4.1. Past performance

The Project has no past record as it is newly established.

1.4.2. Credit Information

Borrower Credit History
A. Credit Relation with DBE
The promoter of the project stated that he has no credit relation with DBE.
B. Credit Relation with Other Financial Institutions
Same as above, The promoter of the project stated that he has no credit relation with
other banks and financial institutuions in the region.

1.4.3. The Lease

Lease amount requested:
Amount: Birr 5,300,000
Purpose: To cover cost of block production machinery, generator &
other equipment’s required by the project.

1.5. Project Background Information and Objectives

A block of concrete is mainly used in the construction of walls as a building
material. Sometimes called a concrete masonry unit, it is (CMU). One of the
precast concrete objects used in the building is a concrete block. The term
precast refers to the fact that before they are taken to the job site, the
blocks are shaped and hardened. Most concrete blocks have one or more
hollow cavities and can be cast smoothly or with a pattern on their sides. In
usage, concrete blocks are stacked one at a time and held together to form
the wall's desired length and height with fresh concrete mortar.

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As early as 200 B.C, a concrete mortar was used by the Romans. To tie
formed stones together in building construction. Small blocks of precast
concrete were used as a building material in the area around present-day
Naples, Italy, during the reign of the Roman emperor Caligula, in 37-41 A.D.
In the fifth century, much of the concrete technology built by the Romans
was lost after the collapse of the Roman Empire. It was not until 1824 that
portland cement was developed by the English stonemason Joseph Aspdin,
which became one of the main components of modern concrete.

1.5.1. Objectives of the Study

The main objective of the study is to prepare a feasibility study for the
establishment of a cement concrete solid blocks and hollow blocks including
bricks, concrete paving blocks, and cement concrete blocks producing plant
in Somali regional state jijiga city, and provide a comprehensive report
consists of the market, technical, environmental, social and financial
analyses components on the envisaged project to help the investor or
project promoter and development bank make informed investment
decisions.

Specific Objectives

To analyze the marketing, market platforms of products' arrangements

To investigate the supply of raw materials, their market arrangements,
and constraints
To reflect the structure of the organization and the requirement for
manpower.
Analysis of the financial, environmental and socio-economic impact
assessment of the manufacturing plant for concrete blocks.
To illustrate the manufacturing process and technical choices.

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2. CHAPTER THREE: PROJECT AND COMMODITY DESCRIPTION

2.1. Project Concept

The project is for carrying out a detailed feasibility analysis for setting up a
block manufacturing unit in Somali regional state jijiga town for cement-
based products viz cement concrete solid blocks, hollow blocks, mainly to
cater for the domestic demand in construction material sector.

2.2. Project Justification

Infrastructure is the building block of economic growth. It forms the

foundation of an economy, reinforces its structures and integrates it into the
productive system. It is the economy’s spinal cord that builds, shapes,
nourishes, energizes & synergizes its existence, growth and continued
incremental progress. Government of Ethiopia has an ambitious program of
infrastructure development for which reasonable budget provisions has been
made in 10th-year plan.

Ethiopia is passing through a fast-growing phase of development. As a

power, transport and other infrastructure are the basic requirements for
economic growth, the development of infrastructure has also been the focus
of developmental programmes. Over the years a number of power projects,
roads, bridges, hospitals, schools and commercial and residential buildings
have been built. This has resulted in a rapidly growing construction industry.
A society becomes functional and productive only when it is empowered by
social infrastructure development such as housing, schools, hospitals, roads,
bridges etc. Cement concrete-based products are essential for such
development and hence products like cement concrete blocks, hollow blocks,
pavers and tiles etc. have been identified.

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The manufactures of these products are environment friendly and could be

commercially exploited profitably with low investment. These items are
extensively used in various activities of infrastructure development like
every construction activities as input, hydroelectric power generation, roads,
bridges, housing and commercial building which is part of urban
development.

With a view to cut down the cost of raw materials in construction industries
and also to accelerate the pace of industrialization in Ethiopia, the
government is keen to promote industrial units for the manufacture of
construction materials. Setting up such industries would help in easy
availability of construction materials at economic prices, generation of
employment opportunities, optimum use of natural and human resources
and above all accelerating the pace of industrialization in the country.

The construction sector as such contributes to 15.7% of Ethiopia GDP which

is further likely to grow. The establishment of an industrial unit for the
manufacture of cement-based products is most suited for development in
the private and public sector. The following factors contribute to its growth:

Requires local resources such as natural & rivers sand, crushed stone
aggregate & cement etc. These raw materials are abundantly available
across the country and jijiga town near to the development activities.
The industries could be set up near the source of raw materials and
market minimizing the transportation cost which is otherwise too heavy.
A unit with selected machinery and equipment can produce various types
of cement-based products required in the construction & infrastructure
development activities and thereby facilitating the industrial unit to
market their products throughout the year and attain regular margins and
economics of production.

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In view of the above, a project has been designed for the manufacture of
various cement-based products viz cement concrete solid blocks and hollow
blocks including bricks, concrete paving blocks, and cement concrete
primarily to meet the domestic demands in Ethiopia, Somali region jijiga
area demand. The details of the products proposed to be manufactured, raw
materials required, manufacturing technologies and machines have been
given in forthcoming discussions.
2.3. Purpose of the Project

The project is related to setting up a concrete block manufacturing plant in

Ethiopia, Somali regional state. The document highlights all the marketing,
management, and financial aspects required for the establishment and
successful running of the project.

The project aims to achieve the following specific objectives:

It is aimed to generate commercial profit.

To produce and supply high-quality cement concrete solid blocks and
hollow blocks including bricks, concrete paving blocks, and cement
concrete products
To create employment opportunity for local society.
To encourage the citizens to invest and develop the industrial sector of
the economy.
To contribute to the Gross domestic product (GDP) of the country.
To utilize the natural resource of the country efficiently.
To transfer knowledge and skill on techniques and modern technologies
and waste management;
To play a significant role in the socio-economic development of the region
in particular and the country in general.

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2.4. Product range and product description

Concrete blocks are made of sand, gravel and cement and used for the
building of walls of houses and other structures with embedded steel
reinforcement. They are also used for the building of fences or partitions in
concrete buildings and other purposes in large quantities.

The demand for a concrete block is increasing due to the growth in the
construction activities and met through local production. Basic raw materials
required are aggregate, cement, red ashes, pumice, etc. which can be
obtained locally. As mentioned above, the project has been designed for the
production of a variety of cement-based products. the production of cement
concrete blocks, hollow blocks and paving blocks

2.4.1. Cement Concrete blocks and hollow blocks

All these years the smallest unit of construction has been red clay bricks.
However due to the use of fertile top and bio-fuel the use of red clay bricks
is being discouraged world over. Inconsistent quality, size & shape and low
crushing strength are some of the factors declining the use of bricks. The
most successfully used alternative material is cement concrete bricks and
blocks. The mechanical strength of these blocks is consistent and much
better than the clay bricks. This ensures structural stability. The two-plane
surface of the blocks obviates the necessity of plaster and if required the
quantity of mortar used is very low.

These masonry units viz cement concrete blocks are used for both load-
bearing and non-load bearing walls, partitions and panels, retaining walls.
The hollow (open & closed cavity) blocks are made with normal-weight
aggregate and are known as normal weight units. The hollow load-bearing
concrete blocks are made of standard sizes viz.

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The weight varies from 17-31 kg. The hollow blocks have one or more large
holes or cavities. The cavities which pass through the blocks are called open
cavities hollow blocks and those which do not effectively pass through the
block are closed cavity block. A hollow block should have 50 to 75% material
of total volume. The solid block has solid material not less than 75% of the
total volume.

The masonry building units are made in sizes & shapes to fulfil different
construction needs these include stretchers, corners, double corners, pier,
jamb, header, bullnose. Half lengths are made to fulfil masonry needs.
Blocks of sizes other than mentioned above can also be manufactured as per
the mutual agreement between the buyer & manufacturer. However, care
has to be taken that the Vibro presses are capable of generating the desires
pressure to solidify the block and impart sufficient green strength. The
hollow concrete blocks are required to conform to be the following
requirement:

Load bearing units should have a minimum bulk density of 1100 kg / m3 and
1500 kg/m3
Average minimum compressive strength specified varies from 3.5 - 15 N/mm2
Solid concrete blocks used as load-bearing unit shall have a bulk density of not
less than 1800 kg/m3
The minimum average compressive strength should be 4.0 - 5.0 N/mm2

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The standard dimensions viz length, breadth and thickness and the weight
per unit for solid cement concrete blocks and hollow cement concrete blocks
are as given below:

Solid Concrete Block Specifications: Hollow Concrete Block Specifications:

Length 290 mm Length 400 mm
Width 200 mm Width 200 mm
Height 140 mm Height 200 mm
Weight: 16 kg Weight: 16 kg

2.4.2. Paver Blocks

The paving blocks of different sizes and shape find application in pavements,
footpaths, gardens, passengers waiting for halls, bus stops industry and
other public places. The product is commonly used in urban areas for the
above applications. Concrete paving blocks are an ideal material for the easy
laying of the footpath. It gives esthetic look and fine finish. This also finds
extensive use outside large public buildings and houses. The Paver blocks
are made both in natural cement color and different bright colors. As per the
application, they are made both in plain geometrical designs & these are
designed and manufactured accordingly. interlocking. Paver blocks are used
for light, medium & heavy duty applications and these are designed and
manufactured accordingly.

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Light Usage: Sidewalks, walkways, garden path, verandahs, swimming pool

decks, Terries, pavements, footpaths, bicycle path, jogging track etc.

Medium Usage: Hotel-driveways, restaurant, shopping mall/plazas,

amusement parks, holidays parking lots embankment, canal lining.

Heavy Usage: Inland container depots, industrial floor, ramps, petrol

pumps, service stations, factory compound, bus terminals & roadsides etc.

Paver blocks are classified in different grades keeping in view the quantum
of the load of traffic at their intended sites of use. The details are as under:

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Specific compressive
Recommended
strength of paver Traffic
Grade minimum paver block Application
block at 28 days N/ 2 category
thickness
mm2

Building premises
M -30 30 Non-traffic 50 mm monument, landscape, public
garden and park drives.

Pedestrians shopping complexes,

car parks, office complexes,
M-35 35 Light traffic 60 mm
driveways, farm site, local &
residential footways.
City streets, small & medium roads,
M-40 40 Medium traffic 80 mm
paths.
Bus terminals, industrial complexes
M-50 50 Heavy traffic 100 mm
houses, service stations.
Very heavy Container terminals, bulk cargo
M-55 55 120 mm
traffic areas, airport pavements.

The use of concrete paver has many advantages over the conventional.

 Quality control possible with in house concrete testing laboratories.

 Easy installation without specialized equipment.
 Can be unlocked, removed & re-fixed to facilitate repairs.
 Sophisticated & attractive appearance.
 Maintenance-free & economical.
 High compressive strength.
 Low water absorption.
 High abrasion resistance.

2.5. Proposed Business Legal structure

The business legal structure of ahmed Bunow abdi block production is as a

sole proprietorship because of the single ownership involved. Furthermore,
comparatively fewer complications are involved in forming, administering
and running the sole proprietorship or partnership businesses.

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3. CHAPTER THREE: MARKET STUDY

3.1. Demand and supply scenario

The cement-based products envisaged to be manufacture in the unit are the

basic building blocks of any construction viz housing and commercial
buildings, industrial estates, road and bridges, small scale housing projects
and any other type of construction. in a developing economy like Ethiopia ,
the construction becomes the major activity in various spheres of
development, be it power, road, urban infrastructure and housing,
education, health, communication.

Evidently, the strengthening of infrastructure has become a focused sector

for development in Ethiopia. It could be observed that a lot of construction
activities are either in the process of implementation or planned to be taken
up in near future both in the public and private sector. With the growing
pace of development in infrastructure sector mainly power & roads and
increasing trend of urbanization, the construction activities are likely to gain
further momentum. Thus the cement-based products shall account for a
total of 10% of the estimated cost of building construction envisaged for
urban & rural development. This estimate shall further include a part of the
budget earmarked for the development of footpaths, pavements, bridges &
roads etc.

The implementation of the project will lead to a lot of construction activities

in and around the project location. Further, the programme for construction
of roads and bridges in Ethiopia is being taken upon an extensive scale. The
10th year plan document emphasizes on the construction of small scale
housing projects, road network including national highways, rural roads
along with a number of bridges and also on broadening and up-gradation of
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existing roads and highways. Similarly, it is estimated that the urban

population is likely to grow much higher than the present level resulting in
the additional requirement of housing facilities and commercial
constructions. small scale housing projects, road constructions and urban
development constitute the main sectors requiring these construction
materials.

The activities in all these sectors of construction shall generate a huge and
long-term demand for various construction materials. As the items proposed
to be manufactured in the project are the basic units for construction for any
type of construction, prima-facie, there would be no problems in marketing
the products of the unit. In the construction of housing Project, cement
concrete blocks and bricks have been used. Keeping in view, the boom in the
construction industry in Ethiopia, there is ample scope for setting up a few
more units for the production of cement block products.

3.2. Local demand and supply

The demand for blocks production and sales is derived from building and
general construction activities. Since transporting and selling blocks over a
long distance is not a profitable operation, the relevant market in this case is
the local or regional market. As far as the supply is concerned, the standard
practice to date in Somali regional state as well as most other remote and
emerging regions is for construction firms to meet their need by producing
own blocks which is carried out on-site.

Since the demand for Different size Blocks in Somali Region and JiJiga is
assumed to be mainly dependent on the amount of public sector
construction activity in the short and medium run, the Ten Year
Development plan of the region which catalogues individual projects is used
to identify the relevant construction projects.

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The plan has separate sections covering Education, Health, Housing and
Road Construction, among others. The private sector's demand is also taken
account of, and is expected to emanate mainly from commercial buildings
for hotels, restaurants, gas stations and the like.

According to the Ten Year Development Plan of the Somali region and JiJiga
administration, a total of 10 Health Posts, 10 Health centers, 1 Hospitals, 25
Primary Schools, 25 Secondary School and 10,000 Residential Houses are
envisaged to be built in different woredas of jijiga city. In addition, more
than 5,000 buildings of small and floors will be constructed during the plan
period. Apart from these public investments, as a consequence of increased
economic activity in the region, the private sector is bound to invest in the
construction of low rising (ground plus one and two) commercial and office
buildings. Table 3.1 details out the anticipated realization of the plan

Table 3.1: PROJECTED IMPLEMENTATION OF CONSTRUCTION PROJECTS

Sr.
No. Item Year
2021 2022 2023 Total
1. Heath post 3 2 5 10
2. Health center 2 2 3 10
3. Hospital 0 1 1 5
4. 5 5 15 25
Primary Village
School (PVS)
5. Complete Primary School (CPS) 3 2 15 25

6. Secondary School 2 5 15 25
7. Residential House, (G+0) 1000 1000 10000 25000
8. Commercial & Office Buildings
- G+0
- G+1 1000 2000 2000 5000
- G+2 15 20 250 500
10 10 20 300
9.

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In order to establish the block production requirement for various types of

Health and Educational buildings, the standard design and bill of quantity
(BoQ) of the respective sectors was scrutinized. For commercial and
residential buildings a sample of BoQ of various buildings was assessed to
establish the average requirement. However, since some of the construction
enterprises are likely to have their own blocks production facilities, it is
assumed that only about 50 per cent of the anticipated building construction
would create a market for the envisaged plant. The Somali Region’s jijiga
area demand for blocks in the next three years is forecasted on the basis of
the projected implementation of construction projects
For the part of the forecast period extending beyond the coming three years,
an annual average growth rate of 10% is used to execute the demand
projection; Since the Ethiopian economy has been growing at an average
rate of 7% in past, a 10% growth rate in the construction sector is not an
unlikely. Table 3.2 shows the demand projection.

Table 3.2.: PROJECTED DEMAND FOR BLOCKS PRODUCTION

Year Projected Demand (pieces )

2021 5,554000
2022 7,672,000
2023 9,090,000
2024 11,200,000
2025 13,320,000
2026 15,450,000
2027 18,600,000
2028 22,750,000
2029 25,930,000
2030 29,120,000
2031 34,340,000

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3.3. Competitive Advantages

The block products proposed to be manufacture by the unit constituent the

basic building blocks for any construction activity. The competition from the
region is very low due to small scall manual individual block products
producers. The unit in major cities is being recommended mainly for catering
to the local demand of buildings and related construction activities in the
area and the competitive advantages would be as under: -

 Production of tailor-made block products in terms of design and quality as

per the requirement of the concerned authorities in buildings and related
construction and other private customers.
 Lower transport cost of finished goods from factory to construction site,
 Value addition to local raw materials.
 Better inventory control management as the product can be planned as
per the demand of the customers.
 The products could be supplied at short notice to customers

It is envisaged that the proposed project shall be able to supply the hollow
blocks for the construction activities related to construction projects and
other construction projects at economical prices due to lower cost of
transport of finished goods from the manufacturing unit to the construction
sites in jijiga city market area.

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3.4. Target market and Marketing Strategy

The industrial units for the production of cement-based block products could
be developed as a cluster of a number of units manufacturing different
products. In this cluster, a number of units could be set up for
manufacturing different products. This would enable the individual units to
achieve better economics of production since it would be possible to
transport the raw materials in bulk at an economical price and also to
market a wide range of product from one centre of production. The cluster
approach would also help in developing and refining the skills of manpower
to be employed in these units through joint programmes of training and
demonstration. The following strategy could be adopted by the unit for
better market access.

 Long term contract with construction works project authorities for

supplying the cement-based block products on mutually agreed terms
and conditions as the project would be the main buyer.
 Ensuring the quality and design of the products as per the requirement
of the project authorities.
 Direct sales to construction projects in the private sector.

All construction projects viz building construction in both in public and

private sector, road construction, bridges could be the target market for the
project. In most of the private housing construction, normally the red bricks
have been used in the past, however, their cost is quite prohibitive on
account of heavy transport cost. The unit has to strive for placement of red
bricks by cement concrete bricks both on cost considerations as well as on
advantages associated with the use of cement bricks viz less consumption of
cement in the construction for wall construction and plastering. The
marketing team of the unit has to create awareness among the prospective
buyers about the advantages associated with the use of cement bricks.

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The unit also needs to market the cement blocks and paver blocks to road
construction agencies and contractors by offering quality products at a
competitive rate as compared to the blocks usually cast near the site of
construction. This should be possible as the unit can avail the benefits of
bulk purchase of raw materials and supply the quality goods at competitive
prices to the market. The unit also needs to have some skilled peoples on
contract basis who could educate and guide the supervisors, masons and
workers at construction sites in correctly laying the bricks with optimum use
of cement mortar and also in plastering of the constructed walls and
surfaces, to achieve the best results.

3.5. Pricing and Distribution

The current price of blocks of size 20cm around jijiga, at blocks production
sites is between Birr 27-30 /piece. However, the envisaged plant as a
new entrant should set a price of its product lower. Considering lower lease
rate & royalty as well as cheap laboring in site, a factory-gate price of Birr
26/ piece for 20cm is adopted for the purpose of financial analysis.

As regards to distribution, the cooperative will have 2 Sino HOWO trucks

and will distribute to far places of jijiga town and Fafan zone and for near
places it is the retailers that effect the purchase from production site using
their available means of transportation of the cooperative.

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CHAPTER FOUR: TECHNICAL STUDY

4.1. Introduction

The most important technical considerations for this project is raw materials
type and selection, technology and capacity of plant, power source, water
source, production process and production support facilities like land and
factory buildings. While selecting a location for such plastic factory;
availability of raw material, adequate storage and operation space, water
and power supply, a market outlet for finished products and availability of
labour are among the major factors to be considered. Each of them is
discussed in the subsequent parts.

4.2. Potential Locations

It is recommended to establish the unit in an area where the raw material is

easily available coupled with basic infrastructure. The project site should be
a strategic location from where products can easily be accessed or
distributed to different parts of the town, region, or the country.
Infrastructures and services including electricity, water, and telephone and
roads are well developed to reach the company from all directions. Location
of the proposed unit should preferably in the vicinity of the major sites of
construction as well as sources of raw materials. The units for the
manufacture of main raw materials viz stone aggregates and sand also need
to be promoted near the proposed project. Cement, in any case, has to be
transported from the cement factories.

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To select the suitable location for the manufacturing plant, various

parameters viz availability of land, environmental conditions, investments
considerations, operational logistics, future development possibility, socio-
economic factors including availability of services like transport and
communication facilities etc. should be taken into consideration for ranking
the locations.

There fore considering all above requirements, The said project can be set
up in to major cities of Somali regional state especially jijiga city kebele
16 where all infrastructure is available.

4.3. Main Resources

The main resources for the production of cement-based block products
include the following:
 Land and building
 Plant and machinery
 Raw materials viz Portland cement, stone aggregates, natural sand,
stone crush, synthetic and natural pigments
 Power and Water
 Skilled and non-skilled workers
It has been envisaged in the project the land for the project would be
available on a lease basis from the Government. The building and the shed
as per requirements have to be constructed for the unit. There would be
production sections of the unit viz cement concrete block manufacturing
section. Persons having sufficient experience in the production of these
products have to be employed as a production supervisor to ensure the
manufacturing of quality goods. Experienced machine operators would also
be needed for the main machine for hydraulic presses. The operators can
also be trained by the machine manufacturers at the site of the factory
during the installation and commission of the machine.

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4.3.1. Raw materials and consumables

4.3.2. Raw materials for cement concrete blocks

The main raw materials required include cement, stone aggregates, fine and
coarse sand, chemical additives and water. The details are as under:

 Portland cement complying with Ethiopian Standard

 The stone aggregate should be hard preferably more than 5 on morsh’s
scale. It should be free from deleterious matters. The grit size of 8 mm &
less is mostly used.However, in case of large size blocks the mesh size
could be up to 12 mm.
 The natural sand & stone crush of size 2 mm & below is used. It should
be free from clay dust & deleterious matters.
 The water should be free from the matters harmful to concrete and
reinforcement or matters likely to cost efflorescence in the product.
 Additives and admixtures are used to accelerating the process of setting,
water reduction, minimizing air en-trapping & as superplasticizers.
Chemical
 additives are also used for imparting waterproofing characteristics.
Colours and pigments are also used for imparting colour to the products.

4.4. Machinery and Equipment

The basic process involved in the manufacture of cement concrete blocks

includes the mixing cement, stone aggregate and sand in appropriate
proportion and casting of blocks. For the manufacturing of cement concrete
blocks, manual, semi-automatic and automatic processes of operation are
used.

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The major item of machines for automatic, semi-automatic & manual

process are similar except that in case of automatic machines, the
transportation of raw material, mixture, charging of press & shifting of green
product from one machine to the other is carried out with the help of
material handling equipment such as shovel loader, conveyer belt, screw
conveyor & fork lifter etc. Keeping in view, the size of demand for these
products in Ethiopia, a semi-automatic process has been taken into
consideration in the proposed project.

The list of major machinery and equipment requirement of the project along
with estimated costs are indicated Table 4.1.

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As of july 20, 2021 Gc 1USD = ETB 45

qty/set/pcs unit price Total price
S.N Description Orgin
Model USD ETB USD ETB
1 semi automatic block machine (4) 1 1,500,000.00 1,500,000.00
2 mixer 1 653,043.47 653,043.47
3 concert belt 3 150,000.00 450,000.00
4 crasher 1 150,000.00 150,000.00
5 crasher hopper 1 480,000.00 480,000.00
6 pomich hopper 1 60,000.00 60,000.00
china
7 mould 4 50,000.00 200,000.00
8 mechanical palette carrying 4 50,000.00 200,000.00
9 hydraulic unit pampa 1 100,000.00 100,000.00
10 electrical panel 1 120,000.00 120,000.00
Sub total 3,913,043.47
VAT 586,956.52
TOTAL 4,500,000.00
Grand Total 4,500,000.00

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4.5. The Manufacturing Process

The production of concrete blocks consists of four basic processes: mixing,

molding, curing and cubing. Some manufacturing plants produce only
concrete blocks, while others may produce a wide variety of precast concrete
products including blocks, flat paver stones, and decorative landscaping
pieces such as lawn edging. Some plants are capable of producing 2,000 or
more blocks per hour. The following steps are commonly used to
manufacture concrete blocks.

Mixing

1. The sand and gravel are stored outside in piles and are transferred into
storage bins in the plant by a conveyor belt as they are needed. The
portland cement is stored outside in large vertical silos to protect it from
moisture.
2. As a production run starts, the required amounts of sand, gravel, and
cement are transferred by gravity or by mechanical means to a weigh
batcher which measures the proper amounts of each material.
3. The dry materials then flow into a stationary mixer where they are
blended together for several minutes. There are two types of mixers
commonly used. One type, called a planetary or pan mixer, resembles a
shallow pan with a lid. Mixing blades are attached to a vertical rotating
shaft inside the mixer. The other type is called a horizontal drum mixer.
It resembles a coffee can be turned on its side and has mixing blades
attached to a horizontal rotating shaft inside the mixer.

4. After the dry materials are blended, a small amount of water is added to
the mixer. If the plant is located in a climate subject to temperature

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extremes, the water may first pass through a heater or chiller to regulate
its temperature. Admixture chemicals and colouring pigments may also
be added at this time. The concrete is then mixed for six to eight
minutes.

Moulding

5. Once a load of concrete is thoroughly mixed, it is dumped into an

inclined Concrete Blockbucket conveyor and transported to an elevated
hopper. The mixing cycle begins again for the next load.
6. From the hopper, the concrete is conveyed to another hopper on top of
the block machine at a measured flow rate. In the block machine, the
concrete is forced downward into moulds. The moulds consist of an outer
mould box containing several mould liners. The liners determine the outer
shape of the block and the inner shape of the block cavities. As many as
15 blocks may be moulded at one time.
7. When the molds are full, the concrete is compacted by the weight of the
upper mould head coming down on the mould cavities. This compaction
may be supplemented by air or hydraulic pressure cylinders acting on the
mould head. Most block machines also use a short burst of mechanical
vibration to further aid compaction.
8. The compacted blocks are pushed down and out of the moulds onto a flat
steel pallet. The pallet and blocks are pushed out of the machine and onto
a chain conveyor. In some operations, the blocks then pass under a
rotating brush which removes loose material from the top of the blocks.

Curing

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9. The pallets of blocks are conveyed to an automated stacker or loader

which places them in a curing rack. Each rack holds several hundred
blocks. When a rack is full, it is rolled onto a set of rails and moved into a
curing kiln.
10. The kiln is an enclosed room with the capacity to hold several racks of
blocks at a time. There are two basic types of curing kilns. The most
common type is a low-pressure steam kiln. In this type, the blocks are
held in the kiln for one to three hours at room temperature to allow them
to harden slightly. Steam is then gradually introduced to raise the
temperature at a controlled rate of not more than 60°F per hour (16°C
per hour). Standard weight blocks are usually cured at a temperature of
150-165°F (66-74°C), while lightweight blocks are cured at 170-185°F
(77-85°C). When the curing temperature has been reached, the steam is
shut off, and the blocks are allowed to soak in the hot, moist air for 12-18
hours. After soaking, the blocks are dried by exhausting the moist air and
further raising the temperature in the kiln. The whole curing cycle takes
about 24 hours.
Another type of kiln is the high-pressure steam kiln, sometimes called an
autoclave. In this type, the temperature is raised to 300-375°F (149-
191°C), and the pressure is raised to 80-185 psi (5.5-12.8 bar). The blocks
are allowed to soak for five to 10 hours. The pressure is then rapidly vented,
which causes the blocks to quickly release their trapped moisture. The
autoclave curing process requires more energy and a more expensive kiln,
but it can produce blocks in less time.

Cubing

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11. The racks of cured blocks are rolled out of the kiln, and the pallets of
blocks are unstacked and placed on a chain conveyor. The blocks are
pushed off the steel pallets, and the empty pallets are fed back into the
block machine to receive a new set of moulded blocks.
12. If the blocks are to be made into split-face blocks, they are first
moulded as two blocks joined together. Once these double blocks are
cured, they pass through a splitter, which strikes them with a heavy
blade along the section between the two halves. This causes the double
block to fracture and form a rough, stone-like texture on one face of each
piece.
13. The blocks pass through a cuber which aligns each block and then
stacks them into a cube three blocks across by six blocks deep by three
or four blocks high. These cubes are carried outside with a forklift and
placed in storage.

4.5.1. Cement concrete blocks

The manufacturing process of cement concrete blocks mainly involves

mixing and casting of blocks. The concrete mix in respect of cement
aggregate and sand should be suitably proportioned to gain required
strength of block conforming to the standards. The factors like quality of raw
materials, grading, homogenous mixing, vibro pressing and curing plays a
vital role in producing quality blocks. The coarse, fine & medium grade
materials should preferably be mixed in the ratio of 40:20:40 for obtaining
better interlocking of grains. Vibration & pressing action together helps in
better dispersion of mixture and compaction. The amount of water required
for the mixture varies depending upon the grading of aggregated & capacity
of press machine.

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Batching equipment is used for proportioning the ingredient accurately.

Concrete mixer is used for homogenous mixing and blocks are shaped in a
vibro compactor. Material handling is carried out with the help of shovel
loader, screw & belt conveyer and forklift etc. The blocks after formation are
stacked on pallets and carefully shifted to shed in a humid atmosphere to
develop initial strength in 24-36 hours. The blocks are stacked & sprayed
with the water. The spraying of water must be continued intermittently for a
period of three weeks for complete curing. The blocks are then allowed to
dry for four week before dispatch.

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Figure 4.3 The Sketch Map For Simple Block Production Line

As stated above, keeping in view the size of the demand for these products
in Ethiopia, a semi-automatic process has been recommended in the project.

4.6. Quality control

The manufacture of concrete blocks requires constant monitoring to produce

blocks that have the required properties. The raw materials are weighed
electronically before they are placed in the mixer. The trapped water content
in the sand and gravel may be measured with ultrasonic sensors, and the
amount of water to be added to the mix is automatically adjusted to
compensate. In areas with harsh temperature extremes, the water may pass
through a chiller or heater before it is used.

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As the blocks emerge from the block machine, their height may be checked
with laser beam sensors. In the curing kiln, the temperatures, pressures,
and cycle times are all controlled and recorded automatically to ensure that
the blocks are cured properly, to achieve their required strength.

The products proposed to be manufactured by the unit are the basic

construction materials and it is desirable that they are manufactured as per
quality standards. Accordingly, a common testing laboratory is purposed for
the testing of raw materials and finished products and also to ensure in
process quality control. The laboratory will be equipped with the following
equipments to carry out the various tests as per standard procedure. The
details of the tests which need to be carried out and the list of equipment is
as given below:
4.6.1. Physical Tests:
Visual inspection for defect like crack, chipping, open course,
sponginess
Dimensions, flatness of tiles surface, perpendicularity, straightness
Density
Moisture absorption
Drying shrinkage
Water absorption
Compressive strength
Modulus of rupture
Abrasion resistance
4.6.2. Testing Equipment
Steel scale, calipers, rectangle, vernier scale, magnifying glass etc
Balance with accuracy up to 2nd place of decimal
Electronic platform type weighing machine
Vibrating screen set (for grading of raw material)
Equipment for determination of porosity and water absorption

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Glass apparatus like beaker flask, test tube, etc

Universal testing machine
Micro meter gauge, dial gauge
Abrasion testing machine
Drying oven
Rapid moisture testing equipment
4.7. Technical know-how

The manufacturing process for the production of cement-based block

products is relatively simple and involves two major operations viz mixing of
cement, stone aggregates and sand in suitable proportion and casting of the
mix in the form of blocks of requisite size. The ratio of the ingredients in the
mix has to be suitably adjusted to impart the required strength to the block
depending on its sues. These ratios are well- known for various standard
products. Proper mixing, Vibro pressing and proper curing also play a major
role in the quality of the products.

Besides, the design of the product is another aspect which needs to be

looked into. With a view to producing quality goods at economical cost,
experienced people in the production of similar products need to be
employed. The basic details of the technology and machine operations are
also provided by the machine manufacturers. The machine suppliers also
train the operators and skilled workers at their own factory or at the site of
installation of their machines. A provision has been made in the project for
process and quality control laboratory and the finer technical details viz ratio
proportion of ingredients and curing time could be adjusted keeping in view
the local conditions and the test results of the products.

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4.8. Production Capacity

In the manufacturing sections, an appropriate product mix of most

commonly used items has been taken into considerations while calculating
the production capacity of the unit. The annual production capacity for the
manufacture of blocks. For the purpose of financial analysis, product mix has
been taken into consideration on the basis of single shift working for 300
days in a year. 100 days of production has been taken for the manufacture
of each item mentioned below. 80% of installed machine capacity has been
taken as the production capacity of the plant at optimum. The product mix
along with quantity of each item of production per annum is as given under.
Cement concrete blocks:

Production at capacity utilization rate

Project
1 2 3 4 5 and above
Year
50% 60% 70% 80% 90%
400x200x2
00mm 252,000.00 302,400.00 352,800.00 403,200.00 453,600
400x180x2
00mm 294,000.00 352,800.00 411,600.00 470,400.00 529,200
400x150x2
00mm 126,000.00 151,200 176,400 201,600 226,800
400x100x2
00mm 144,000.00 172,800 201,600 230,400 259,200
Total
Production
816,000.00 979,200.00 1,142,400.00 1,305,600.00 1,468,800.00
(pcs)

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4.9. Requirement of power and fuel

It is estimated that 78.8 KWH power connection would be required for the
production unit including the power requirement for production machines
and general-purpose lighting. The cost of power has been calculated on the
basis of Birr 0.58 per unit.

ANNUAL UTILITIES REQUIRMENT AND COSTS

Unit of Cost
Descriptio
Measur Qty (Birr Total Cost
n
e )
1,550,00
Electricity kWh 0.75 1,162,500.00
0
Water m3 35000 9.5 332,500.00
Total
315.60 1,495,000

The expenditure on utilities is expected to increase by 10% annually

because relative price change on these utilities, in any cases, is inevitable
and we should have to take consideration of it since we have no way out.

4.10. Materials And Inputs

The raw materials required for the production of hollow blocks and concrete
pipes are portland cement, sand and aggregates of different sizes. Annual
requirements of theses materials at full capacity production are given in
Table 4.2 below. Auxiliary materials include colouring pigments and other
admixtures. Annual requirements and corresponding costs are indicated in

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Table 4.2.cost of raw materials

Cost of Raw Material

sno Description Qty. Unit cost Total Cost

15,00
Portland cement (qtl)
1 0 600 9,000,000
3
Aggregates ( m ) 5,900
2 1,000 5,900,000
Sand (m3)
3 16900 650 10,985,000
Lump-
Coloring Pigments
4 Sum 190,000.00 190,000
Lump-
Admixtures
5 Sum 350,000.00 350,000
Subtotal
26,425,000
Wastage allowance
6 2% 528,500.00
Grand Total
26,953,500

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4.11. Utilities
The utilities of the envisaged plant are electricity and water. The later shall
be the tree from any deleterious substance which adversely affects the
quality and permanence of the concrete blocks or pipes. The annual utility
requirement of the project is indicated in Table 4.3.
Table 4.3: annual utilities requirements and costs

ANNUAL UTILITIES REQUIRMENT AND COSTS

Unit of
Description Qty Cost (Birr) Total Cost
Measure
Electricity kWh 1,550,000 0.75 1,162,500.00

Water m3 35000 9.5 332,500.00

Total 315.60
1,495,000

The expenditure on utilities is expected to increase by 10% annually because relative price change on
these utilities, in any cases, is inevitable and we should have to take consideration of it since we have no
way out.

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CHAPTER FIVE: ORGANIZATION, AND MANAGEMENT

5.1. Organizational structure and Management

The organization is a setup in which workers systematically structured and

managed to meet a need or to pursue collective goals on continuing bases.
It shows a flow of command and the structure in which employees of the
organization are structurally combined with the available resources to
achieve the stated objectives. Having a well-structured organizational
management system is one of the success factors of any organization. The
hierarchy of decision-making, superior-subordinate coordinate and
relationship, communication process are all determined by the nature of
organizational structure since it affects the overall efficiency and
performance level of the organization. Similar to many manufacturing
industry establishments, block manufacturing has also functional and
production-based organizational structure. The typical structure is presented
in fig. 5.1 below comprises three departments responsible for the general
manager and two sections liable for production and testing and quality
control department.

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Figure 5.1: Typical organizational structures

5.2. Manpower Requirement

The project has good employment potential for skilled and unskilled workers,
which would be employed in the production unit. Besides, the project would
generate employment potential in marketing & sales of its produce,
transport of raw materials and finished products. The project would thus
create opportunity both for direct & indirect employment. The annual
production turnover and the financial projections are based on a single shift
operation of machines. For the operation of the unit, managerial and office
staff, marketing executives, laboratory technician, laboratory assistant, plant
supervisors, skilled workers and unskilled workers would be required. In
case the unit is required to be operated in more than one shift, additional
staff would be required. In addition to this, there would be a requirement for
contract workers during the construction phase of the factory and installation
of machinery and equipment. Manpower with respective education, minimum
experience and monthly salary is stated in table 5.1 below:

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MANPOWER REQUIEREMENT AND ANNUAL LABOUR COST

Job Description Qt Monthly salary Annual salary

sno

General Manager 120,000

1 1 10,000
Secretary 4,500 54,000
2 1
7,000 84,000
3 production & Plant supervisor 1
Administration and Finance Head 7,000 84,000
4 1
Marketing Head 5,600 67,200
5 1
Sales Representatives 4,500 54,000
6 1

Accountant 6,000 72,000

7 1

Casher 5,500 66,000

8 1
Quality control Officer 6,500 78,000
9 1
Laboratory Technician - 5,500 -
10

- 5,500 -
12 Office staff
- 3,500 -
14 Lab assistant
5,500 66,000
15 Machine operators 1
Drivers 6,000 72,000
16 1
Guards 3,000 72,000
17 2

4,500 54,000
11 Unskilled workers 1

Total 13 85,600 889,200

Salary is assumed to increase 10% each year

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5.3. Training requirement

Training is a process of enhancing the skills, capabilities and knowledge of
employees for doing a particular job. It is crucial for organizational
development and success. It is a fruit full to both employers and employees
of an organization. An employee will become more efficient and productive if
he/she trained well. As a result, continuous and related training is
recommended as deemed necessary.

Employee remuneration and benefit are also an important factor for

employee’s productivity. Employee remuneration refers to the reward or
compensation given to the employees for their work performances. Similarly,
benefits are any perks offered to employees in addition to salary. The most
common benefits are medical, disability and life insurance, retirement
benefits and fringe benefits. Both remuneration and benefits provide basic
attraction and motivation to an employee to perform a job efficiently and
effectively. Thus, the investor has to pay attention to those issues and works
hard on their implementation for the success of the project.

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CHAPTER SIX: FINANCIAL ANALYSIS

6.1. Introduction
The financial and economic evaluation incorporates a determination of
investment cost, production cost and economic viability of the proposed
project. The economic feasibility of the project was evaluated based on the
profitability, Internal Rate of Return (IRR), Net Present Value (NPV) and
sensitivity analysis was also carried out. Finally, the overall feasibility of the
project was evaluated based on market, technical and financial feasibility
results.
6.2. Total Initial Investment Cost
Investment items considered in this study are building & construction,
machinery & equipment’s, and office furniture, vehicles, and working capital.
The total investment of the project is Birr 9.003 million. This covers fixed
investment costs, as well as working capital requirements. Of the total costs,
Birr 7.616 million (85%) is a fixed investment, Birr 1.387 million (15%)
working capital. The major breakdown of the total initial investment cost is
shown in table 6.1.

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Table 6.1. total fixed investment

Total Fixed Investment
Source of Fund
Equity Total
Sr.N Description Bank Loan
(Birr) (Birr)
o.
Building &
1
Constructions 717,600.00 717,600
Machinery &
2
Equipment 4,500,000 4,500,000
Furniture and
3
Fixture 98,400.00 - 98,400
4
Vehicle 1,500,000.00 1,500,000

Generator 800,000 800,000

Total Fixed
Investment 2,316,000 5,300,000 7,616,000
5
Working Capital 1,387,569 1,387,569

Total Investment 3,703,569 5,300,000 9,003,569

percentage (D/E)
41% 59% 100%
Ratio

6.3. Production Cost

The annual production cost at full operation capacity is estimated at Birr

28.658 million (see Table 6.2). The material cost accounts for 77.6 per
cent, while repair and maintenance take 1.72 per cent of the production
cost. Wages and Salaries account for 6.71% of total production cost

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6.4. Project Financial Results

The objective of this section is to provide information about the financial

position, performance and changes in the financial position of the project to
make a rational economic decision. Hereunder, we will try to look at
Profit/loss or income statement forecast, cash flow and balance sheet
projection, financial rate of return and sensitivity of the project for potential
variables.

6.4.1. Profit/Loss Forecast

Profit/loss forecast presents the results of the project’s operations during a

period of time. It shows income earned from the project and expenses
incurred in attaining the income. The projected profit/loss statement of the
project reveals that the project will earn a profit of Birr 1.951 million during
the first year of its operation and earn a profit of Birr, 3.183 million at the
10th end year of the projection. This indicates that the project could run a
profitable business venture and can maintain the objective of its
establishment at competitive quality and price.

6.4.2. Cash Flow Forecast

Cash flow projection provides a look at the movement of cash in and out of
the project. It is important in determining whether or not a Project/factory
has enough cash to pay its bills, handle expenses and acquire assets. Thus,
it is important to give due attention to identify whether the total inflows of
the project can cover all cash outflows during its operational period. Unless
the project will face a liquidity crisis and fail before achieving its objective of
the establishment. Based on this fact, the forecasted cumulative cash
balance shows a balance of Birr 2.376 million in the first year and will grow
up to Birr 28.541 million at the end of the project period, demonstrating that

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the project will not face liquidity constraint to finance its operational costs as
well as a debt obligation.

6.4.3. Balance Sheet Projection

Balance Sheet Projection is used to provide insight into the assets and debts
of the project at a particular point in time. Total assets of the project
expected to rise from Birr 9.003 million during the first operational year to
Birr 35.741 million at the end project year.

6.5. Measures of project worth

6.5.1. Net present value

Net present value (NPV) is defined as the total present (discounted) value of
a time series of cash flows. NPV aggregates cash flows that occur during
different periods during the life of a project into a common measuring unit
i.e. present value. It is a standard method for using the time value of money
to appraise long-term projects. NPV is an indicator of how much value an
investment or project adds to the capital invested. In principle, a project is
accepted if the NPV is non-negative. Accordingly, the after-tax net present
value of the project at a 12% discount rate is found to be Birr 17.420 million
which is acceptable. For detail discounted cash flow

6.5.2. Internal Rate of Return (IRR)

The internal rate of return (IRR) is the annualized effective compounded

return rate that can be earned on the invested capital, i.e., the yield on the
investment. Put another way, the internal rate of return for an investment is
the discount rate that makes the net present value of the investment's
income stream total to zero. It is an indicator of the efficiency or quality of
an investment. A project is a good investment proposition if its IRR is
greater than the rate of return that could be earned by alternate

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investments or putting the money in a bank account. Accordingly, the

estimate of IRR after tax is estimated to be 65%.

6.5.3. Sensitivity Analysis

Under sensitivity analysis, we tried to make assessments at different cost

and revenue scenarios that could bring different financial results. The
profitability of the project will vary under various circumstances that could
happen. Thus, the project's sensitivity to adverse circumstances of revenue,
operating cost and investment cost is analyzed as follows

i) Decrease in Revenue

Based on financial findings, when revenue decreases by 10% after-tax IRR

of the project reduced to 51%. From this, we can say that the project is
viable and can achieve the objective of its establishment even in an adverse
circumstance that may happen and trigger to reduce its revenue by 10%.

ii) Increase in operating Cost

Also, if the operating costs of the project may increase by 10% due to
unforeseen circumstances; other things remain constant, after-tax IRR of
the project anticipated to reduce to 60%. This means, still the project can
cover its costs and make a profit for the owner.

iii) Increase in Investment Cost

When investment costs increase by 10% after-tax IRR of the project is

anticipated to decrease to 59%.To summarize, the project is more sensitive
to sales performance. However, it can absorb external shock and attain its
objectives of the establishment

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CHAPTER SEVEN: ENVIRONMENTAL IMPACT AND SOCIO-ECONOMIC

BENEFIT

7.1. The environmental aspect of the manufacturing process

The manufacturing process involved in the production of cement-based

products is mixing of various ingredients viz cement, stone aggregate and
sand, the conversion of raw material mix into the form of paste followed by
casting of the mix in requisite shape and sizes. There are no solid, liquid or
gaseous effluents generated during the manufacturing process. However,
while preparing the mix of cement, stone aggregates and sand, some dust
particles get floated in the air causing a higher level of suspended particulate
matter (SPM) in the air. This could be checked and controlled by providing
appropriate coverings to the mixing bins, use of exhaust fans and a
sprinkling of water on sand and stone aggregates as also during mixing
operations. A provision of dust collector would further minimize the SPM in
the air and improve the working conditions in and around the manufacturing
unit. The wearing of the mask by workers to protect them from inhaling dust
particles is also recommended.

7.2. Waste generated and mitigation measures

In the manufacturing process of cement-based products, no solid, liquid or

gaseous wastes are generated. However, as mentioned above, during the
handling of cement, stone aggregates and sand, dust particles flow in the air
resulting in a higher level of suspended particulates matter (SPM). To reduce
the SPM, various methods could be used viz covering of mixing bins, used of
exhaust fan, a sprinkling of water and use of dust collectors. Besides, there
would be some waste of metal scrap, wooden scrap, broken bricks, stone
aggregates, etc during the construction phase of the project. The waste
generated during the construction phase is mainly used for earth filling &
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flooring. The details of the waste generated during the construction phase
and project operation phase along with mitigation measures are given below
in subsequent paras.

The details of the waste generated during the construction phase and the
mitigation measures are as under: -

S. No. Type of Quantity Mitigation Impact on the

waste/scrap measures Environment
1. Metal scrap No adverse
Around 2-3 % of the Sold to trade impact
steel used in channels for
construction reprocessing.
2. Wooden scrap Around 5-7% of the Used as fuel. No adverse
wood used in impact
construction.
3. Clay mounds Depending upon on Used for earth No adverse
stones, the filling. impact.
the topography of
4. Brick stone the
5% construction
of the quantity Used for No adverse
aggregate used flooring and impact
cement earth filling.
Waste generated during project operation phase and mitigation modes
The details of the waste generated and the mitigation measures are as
under:
S. No. Type of waste Quantity Mitigation Impact on
measures environment
1. Liquid effluents Nil Not applicable No adverse
impact
2. Gaseous effluents Nil Not applicable No adverse
3. Solid effluents or waste Small SPM can be impact
No adverse
* During handling of raw quantity checked by impact
materials, there is likely a sprinkling of
to be a higher level of water, covering of
SPM in the air in the mixing bins and
production use of dust
shed. collectors.

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CHAPTER EIGHT: CONCLUSION AND RECOMMENDATION

8.1. Conclusion

This business plan report had been prepared on the basis of practical
experience that acquired the latest information on block production. We
expect significant amount of money flow to the Somali regional government
and the jijiga city administration in the form of tax, royalty fees, and turn
over tax. Thus, we believe that the proposed project will contribute for the
national development and economic growth.

Finally, ahmed bunow Block Production Company is designed to boost the

construction input industry especially different size Blocks sector activities by
employing good quality principles and services for its customers. This project
is feasible to install the factory in jijiga area, Ethiopia. The main and basic
success of the project is not only informs of the profit we get from it but also
interims of saving foreign currency and job creation and utilization of natural
resources of the region.
According to the projected income statement, the project will start
generating profit in the first years of operation. The income statement and
the other indicators of profitability show that the project is viable. The
establishment of such factory will have a natural resources utilization and
job creation.

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The product has a wider application in many home services of construction

industry, so as can be seen from this feasibility study which has shown these
 Good availability of raw materials
 Great national and local demand of the product
 Feasible design and profit generating study of the project
 Cheap labor and services

This can be concluded that the project can have a sound investment that the
project can be implemented and if implemented it could have the following
advantages
 Creating job opportunity for local people and generating profit
 Creating income tax for the government and Natural resources usage
and utilization

So it is concluded that the project could be financed, implemented and could

have the above mentioned advantages and others.

8.2. Recommendation

Based on the different analysis conducted in the preceding chapters, the

project is found to be technicality feasible. The market analysis indicates the
existence of the demand gap, and detailed financial assessment elucidates
profitability and liquidity in the projection periods.

In addition, it is believed to have diverse socio-economic contributions. In

lieu of the above justifications and the details in this document, the
consultant research team has recommended different stakeholders and
development bank of Ethiopia to finance and to support this project to be
realized in the Somali regional state jijiga city.

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Annexes

 Proforma invoice selected

 Assumptions
 Investment cost
 Fund allocation
 Operating Costs
 Working capital
 Depreciation
 Disbursement Schedule
 Implementation schedule
 Income statement
 Cash flow statement
 Balance Sheet statement
 Loan repayment schedule
 FIRR&Sensitivity Tests
 Summary of investment costs

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